Federal Reserve Chairman Jerome Powell is scheduled to begin two days of semiannual testimony in Congress today, drawing significant market attention as participants seek clarity on the Fed’s monetary policy direction this year. There is. Key questions include the timing of the first rate cut and the total number of rate cuts expected over the year.
Mr. Powell is expected to echo the same cautious stance of his colleagues and signal that the Fed is in no hurry to cut rates. The central bank wants further assurances that inflation is on a consistent downward trajectory towards its target before considering cutting rates. As for the number of rate cuts, Chairman Powell is likely to point to the median forecast of three rate cuts this year, emphasizing that any adjustments will depend on future economic data.
Current federal funds futures suggest the probability of a first rate cut in June is just under 70%. There is a more than 80% chance that the federal funds rate will be adjusted to a range of 4.50-4.75% by the end of the year, resulting in three 25-bp cuts from the current 5.25-5.50% level. become.
The key thing to note is that the 10-year Treasury yield has broken below the 55D EMA (currently at 4.188), confirming that the correction recovery from 3.785 has already been completed at 4.354. As long as this EMA holds, risks will remain to the downside. A deeper decline towards the 3.785 low is favorable. This development will likely put some pressure on the dollar, or at least limit its upward momentum. A daily close above the 55 EMA will delay the bearish development. However, the rebound potential should be limited to less than 4.354.